How better data on infrastructure projects can support private investment in emerging markets

We live in an inter-connected, data-driven world. Investors, like many other professionals, rely more and more on data to make informed decisions on where, when, and how they should invest their money.

But, as I discussed in a recent blog, a number of commercial dashboards are aiming to close this gap, with information on infrastructure projects that need financing in emerging markets. These and other specialized commercial databases are trying to map the market, giving investors tools to identify investment-ready opportunities with the best chance of a sizeable return.

We are looking closely at how the World Bank Group can help to organize and share data more effectively to push out more data and support private investment in high-quality infrastructure opportunities in emerging markets. Last month, the MDCFO’s office organized a seminar on infrastructure project dashboards, bringing together commercial database sponsors with investors and other stakeholders. Staff from commercial databases were in attendance, representing both very large databases (covering thousands of projects globally worth nearly US$10 billion in asset value) to smaller, more specialized databases (covering less than 100 projects but focused on emerging markets). The seminar kicked off the MDCFO Finance Event Series, focusing on key topics at the intersection of finance and development.

This first discussion proved very illuminating. While commercial databases have flourished over the past decade, with data on thousands of projects, there are still gaps in coverage and a lack of depth, quality, and consistency of information. Improving this data is critical to bringing investor attention to bankable infrastructure projects.

Areas where we need to improve data include:

Risk profile. The seminar highlighted concerns on the extent to which the risk profile of projects is effectively captured on existing databases. For instance, commercial databases currently do not have a way of tagging projects as risky when they have stalled. Some databases have committed, however, to being more aggressive in soliciting and publishing information on procurement timelines so that investors can better keep track of projects they are interested in. This additional granularity would allow users to better assess the implied riskiness of a project and challenges that current projects are facing.

Comparability of opportunities. Seminar participants pointed to the lack of standardization of project data (e.g., common or standardized deal terms) as well as gaps in data (e.g., relative returns). These factors limit the comparability of opportunities across and within project databases. Participants suggested that standardizing terms across the industry could also help overcome information asymmetries that have thwarted comparability across the many specialized databases that have been developed.

Project prioritization within a government’s investment program. Participants also asked whether commercial databases could provide information on how an individual project fits and its priority level within a country’s infrastructure investment program. As an effective model, one panelist noted that Ontario’s government publishes an annual project pipeline outlining infrastructure plans in the Canadian province over the next 12 months. The pipeline is published on a commercial database, which is available to project sponsors, investors, and other interested parties. This helps aspiring sponsors and financiers prepare project bids with a vigor that would not be possible without the certainty that this published infrastructure program provides. In addition, the Global Infrastructure Facility noted that their new Project Assessment Tool, which will be rolled out in 2017, aims to help countries evaluate and benchmark project preparation vis-à-vis these best practice approaches. The discussion also raised questions on how fully subnational projects are reflected in databases, as well as how state-owned enterprise projects are reported.

Tailored and just-in-time information. New features that commercial databases plan to add include email triggers to inform subscribers about opportunities in specific sectors or regions. They also expect to make it easier to reference the various projects backed by a particular lender or that have inputs from a particular advisor.

Participants noted that there is a much broader range of investors today who are interested in emerging market infrastructure—from commercial banks to institutional investors—and that their information requirements may differ. Investors and database sponsors in attendance agreed to discuss further how they can better match the supply of information to the growing demand for specific information from potential investors.

The World Bank Group’s Public-Private Partnership team, the Global Infrastructure Facility, and other units will continue to explore best-practice approaches to information sharing and project preparation, as well as how to adapt these models to emerging markets.

Great article. Wonder how quickly we can more to create similar databases to guide impact investors in the emerging fields of sustainable commodities, conservation, forestry and water where risk profiles are even more uncertain. What is certain is there is quite a lot of interest from private sector players in this expanding this sector.